Cerberus’s Stelzer Sees Opportunity Betting Against CMBS

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Scott Stelzer of Cerberus Capital Management said there are opportunities to bet against commercial mortgage bonds created prior to the 2008 financial crisis.

Investors have “piled into” legacy securities without full consideration of potential losses, Stelzer said Wednesday at the SkyBridge Alternatives Conference in Las Vegas. Some of the transactions are going to be hard to refinance and could become much cheaper, he said. Stelzer joined New York-based Cerberus in 2008 from Morgan Stanley and oversees CMBS securities.

Prices on a Markit Group Ltd. CMBX derivative index linked to mostly junk-rated debt issued in the years leading up to the property market crash have risen to 81.75 cents from as low as 51.4 cents in 2011. The securities have rallied as real estate prices have recovered and low interest rates have encouraged debt buyers into higher-yielding debt.

Prosiris Capital Management founder and Chief Investment Officer Reza Ali said he sees opportunity in BB-rated collateralized loan obligation equity and energy debt.

“Energy is a space where there’s a misconception that you need to have a view on oil and need to get that right,” Ali said Wednesday at the conference. “That’s not true. There are enough opportunities out there, whether in explorers or refiners. It’s the ability to understand complex financings and get a decent return.”

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